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The Dairyman MARCH 2011 5
NEWS
DAIRY farmers need to get on side with
public opinion or they risk losing their
licence to farm freely, John Penno,
chief executive of dairy company Synlait,
told a Federated Farmers Dairy Council
meeting.
He said he jumped at the chance to talk to
the council meeting in Ashburton because
they were a key group in terms of re-engag-
ing with the community.
“There’s a grave risk our licence to farm
freely will be taken away from us. Each time
issues come up we’re just giving them away.
The reality is we’re not on side with Kiwis at
the moment and we need to get on side.”
Mr Penno warned the meeting at the
beginning of his talk that he was likely to say
some controversial things.
He said the popular perception of dairy
farming was that farmers were making
money at the public’s expense, that New
Zealand could become one big dairy farm,
and that farmers would sell their land to
overseas interests.
“You know what; I think they’re largely
right.”
The dairy industry was not managing the
environment as well as it should be. “We are
degrading the quality of water in Canterbury.
You are going to affect water quality.”
On New Zealand becoming one big dairy
farm and land being sold to overseas buyers,
he said the drivers were in place.
“The brakes are on at the moment because
of lack of capital. We are going to sell land
overseas because there’s not the equity in
New Zealand.
“I couldn’t believe it when Federated
Farmers said we shouldn’t sell to overseas
people. We desperately need overseas capital
now.”
He said the problem was dairy farmers had
entered into an issue by issue debate. “Each
time one comes up, we progressively lose.
Each time it costs us. We hide away from
issues until it’s too late. Then when we
debate them we lose.”
Dairy farmers needed to act collectively,
he said. “You’ve got to be ready to give some
stuff away, but you don’t do it one by one,
you do it as a package.”
He said farmers needed to be ready for
dairy zoning. That could mean staying away
from areas the community thought were
important such as the Mackenzie Country,
around Lake Taupo and the Rotorua area.
“From a perception point of view think
how that would impact. As compensation we
would want to be able to continue to develop
in areas like Canterbury and Southland.
“The only way we’re going to get wins on
individual things is if we’re prepared to lis-
ten to the community and give them what
they want.”
Mr Penno said dairy companies should not
take responsibility for farmers who did not
play by the rules.
He cited Air New Zealand as an example
of the way the dairy industry should be act-
ing. “Fyffe (Air NZ chief executive) didn’t
wait until he had a good news story, he’s
faced up to bad issues as they’ve come up.
He understands how to use the media well.”
WHILE the future for dairying looks
really good long term, farm debt
levels remain a big problem, says
Synlait chief executive John Penno.
“2009 was the year the world changed. I
don’t think we’ve got our heads around this
and what it means.”
Dairy farmers had thought it was possible
to borrow as much as they wanted against
assets, but they weren’t unique. It was US
housing that eventually burst the bubble.
New Zealand farmers were lucky because
the banks here were sound.
He said the industry was too heavily
indebted and it would get no special deals
from banks in future.
“If you think you’ve got too much debt
now, ask your banker how you will fare
under normal commercial facilities.
“As farmers we’re all thinking in a short
term environment. (With low interest rates)
This is a time to get your debt down and get
it down fast. New Zealand’s debt is not
Government debt, it’s in farms, households
and business.
“If I’m right and interest rates do go up,
who’s going to be in a bit of strife?”
Mr Penno said New Zealand dairy had big
opportunities in China with 60 million chil-
dren under four years.
“There’s enormous spending power sitting
over those 60 million kids.”
However the overheated property market
in China was a big threat to that potential.
“It’s a thing that scares me. I’m not saying
it’s going to collapse. In a Western context it
would have collapsed by now. You and I
have a lot riding on that not happening.”
He said the value of product dairy farmers
were producing was so much higher than
other types of farming.
— Howard Keene
Licence to farm freely under threat
Dairying future optimistic, but farm debt levels still a problem
By HOWARD KEENE
John Penno, Synlait chief executive.